Neighbouring New Zealand has set aggressive emissions targets for new vehicles by 2025, and the Australian car industry has warned it could cripple an already fragile market.
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Aggressive vehicle emissions reduction targets risk crippling the new-car market in neighbouring New Zealand – and the Australian automotive industry says the rollout will serve as a warning for local regulators.

In January 2021, the New Zealand government announced a drastic reduction in vehicle emissions targets by 2025.

Under the plan, new passenger cars and small SUVs must emit less than 102 grams of CO2 per kilometre – a 40 per cent reduction from the current new-vehicle average. Utes and vans must emit less than 132 grams of CO2 per kilometre. The targets come into force from 2025.

Car companies can sell new motor vehicles that exceed these emissions levels but they will be hit with financial penalties – imposed by the NZ Government – which will in turn push up showroom prices in an attempt to dent the appeal of vehicles with high emissions.

When the plan was announced in January, the New Zealand car industry said the targets were too severe and too soon.

Now the Australian car industry has weighed into the debate, after releasing the first annual results of its voluntary emissions reduction code.

“You can’t do this in a short timeframe,” said Tony Weber, the CEO of the Federal Chamber of Automotive Industries, the peak lobby group for car companies in Australia.

Mr Weber told CarAdvice “what they're trying to do in New Zealand … is madness” adding there was a risk it could cripple new-car sales in an already fragile market.

New Zealanders buy as many new cars in a year as Australians buy in a month.

Close to 120,000 new cars were sold in New Zealand last year, about 13 per cent the number of new vehicles delivered in Australia in 2020.

“The better thing is to … make that transition (to lower emissions vehicles) over a long period of time,” said Mr Weber.

At issue is the time it takes to design, develop, engineer and introduce vehicles with new technologies.

“Five years is tomorrow in the car industry,” said Mr Weber, in a reference to the average five-year timeline required to transform a car from an idea on a piece of paper and into a showroom reality.

While new mobile phone technology comes out every year, most new cars have a model lifecycle of five to 10 years. Designs being drawn up today won’t hit showrooms until half a decade or more from now.

The Motor Industry Association (MIA) of New Zealand said the 2025 targets set by the NZ Government are “the most aggressive and severe in the world”.

“No other country has ever had to face a 40 per cent rate of reduction in five years that we now must meet,” David Crawford, the chief execuive officer of the MIA, said in a media statement earlier this year.

“We welcome the (NZ Government’s) commitment to introduce incentives (on fuel-efficient and low emissions vehicles) and await more details on how these will work,” said Mr Crawford.

“However, while we believe the fuel economy standard is necessary, the speed at which we must reach the average target of 105 grams of CO2 per km is the most aggressive an severe in the world.”

The New Zealand car industry has asked the government there to push back the introduction of the emissions reduction targets to 2030.

“We urge the Government to amend the target date to 2030,” said Mr Crawford.

“Contrary to the views of (the NZ Government), the 2025 target date does not allow time for model development, vehicle sourcing arrangements and does not recognise that for many distributors in New Zealand their model choice is tied to the Australian market (which does not have an emissions reduction target).”

Mr Crawford said the New Zealand market – which represents just 0.018 per cent of global vehicle production – is “too small for manufactures to develop models just for us..

There is also a risk the vehicle emissions reduction mandate in New Zealand could further open the floodgates to “grey import” used cars (such as second-hand vehicles from Japan that were not sold as new in New Zealand by manufacturers).

Imported used vehicles must still meet emissions reduction targets in New Zealand, but the penalties for exceeding emissions limits are half that of a new car – because it has been calculated they will have half the remaining life of a new car on local roads.

When New Zealand changed its rules to allow the importation of cheap used cars from Japan in the early 1990s, it initially brought down the average age of new cars on the road from 11 to nine years.

However, the surge in the sales of imported used cars has since had the opposite effect. The average age of motor vehicles in New Zealand is now close to 14.8 years, says the MIA.

Older, less safe cars are over-represented in fatal crashes – and in most cases have higher emissions than newer cars.